Bank market-making is more limited, but also more robust

Liquidity is a concern, but lower capital requirements are not the answer, writes SNB's Rime

Bond prices
Illiquidity in the bond market is a concern among many market participants

Bertrand Rime is director of financial stability at the Swiss National Bank and a member of the Basel Committee

In recent years, liquidity risk has become a topic of increasing concern for policy-makers. Some worry that in the bond market, liquidity has become more fragile due to structural factors. They point to decreasing turnover, a reduction in the inventories held by bank market-makers and a stronger presence from mutual funds, which are exposed to redemption risk.

An even greater concern

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